The ongoing challenges in countries undergoing transition – including Egypt, Jordan, Libya, Morocco, Syria, Tunisia and Yemen – will continue to affect economic performance in the MENA region, according to a report.

While the regional and international aid has helped to stabilize transition economies and reduce short-term external funding pressures, better medium-term prospects depend upon achieving the political consensus needed to bolster economic reforms and the return of foreign capital.

For many countries, this still seems some way off. Dubai’s real non-oil growth rate is currently around 5 per cent on the back of a rapid expansion in its real estate, tourism, trade and financial sectors, it stated.

In the resource-rich GCC region, by contrast, growth prospects remain favourable, supported by high oil prices, a steady flow of government development spending and – in some cases – an increasingly buoyant private sector.

The real GCC non-oil GDP growth is forecast at around 5.5 per cent per year in 2014 and 2015, 0.5 per cent points higher than in 2013, it stated.

According to NBK, Qatar will remain the best performer, but the Emirati economy – boosted by returning confidence and renewed impetus from infrastructure investment – appears to be improving the quickest.

"We maintain our forecast for oil prices at $100 per barrel (pb), on average, for 2014, a fall of 8 per cent from 2013. Although oil prices held up well last year, continued strong growth in non-Opec supplies and a potential rise in output from Opec members Iran, Iraq and Libya are expected to loosen oil market fundamentals in the first half of 2014," the top lender said in its review.

NBK pointed out that inflation across the GCC region could be pushed higher by a combination of solid growth and rising pressures on housing rents.

"But at around three per cent on a weighted basis, it is unlikely to concern policymakers very much. Meanwhile, the decline in oil revenues will reduce the GCC’s aggregate fiscal surplus to 7 per cent of GDP, from 10 per cent in 2013, said the Kuwaiti lender in its report.

"Although this is still very strong by international standards, we expect GCC countries to pay growing attention to the sustainability of their fiscal positions going forward. This could translate into slower growth in overall spending than before, and tighter curbs on current spending in particular. This, in turn, will have implications for macroeconomic performance in the years ahead," it stated.

Along with a slight improvement in the political climate, this has set the stage for a modest acceleration in growth to 3 per cent in FY14/15. But major challenges remain, said the NBK report.

As well as sustaining progress with the political transition, the government must navigate the need to protect living standards and social stability on the one hand, and enact major deficit-reducing fiscal reforms (particularly on subsidies) on the other, it added.